Some beginner questions related to taxes and tariffs

[Pashahlis]

I watched many videos, read guides and everything. I saw this video, too.

But I am still unsure how I should set my taxes and tariffs. Particularly this video:

I understand taxing the rich in the early game and not taxing them in the late game. But I am confused regarding how I should tax the poor and middle class. Also, he says tariffs should be 100% early game, 0% mid game and 100% late game again. Because, as he says, if your industry doesn't have to import much you can set tariffs this high and not have your factories go bankcrupt. However, how do you make money with tariffs if no ones importing stuff? I am confused how this works.

Basically:
1. How should I tax my poor and middle class?
2. How do I make money with tariffs if no ones importing anything?

 

[Challenge]

A number of people say to tax the poor the most, the middle class less and the rich least of all. The way I do it is based more on what the pops need, rather than income level. The categories of needs (life, luxury, etc.) are the guides. If you want the pops to stay reasonably productive and not revolting, your taxes need to be low enough that daily and life needs are met by the majority of the income classes' pops. If everyone gets luxury needs, however, you probably could raise taxes a bit. If you raise taxes in one group to where the pops don't make enough for life needs they will start to migrate to jobs where they can get more of them. Lower them to where luxuries are available to more pops in a group and they will move toward the jobs in that tax bracket. It's more of a juggling act than an absolute amount.

Tariffs put money into your treasury, but do it at at the cost of pops not being able to afford the goods mentioned above. They will buy what they need first and luxury and even life needs will start to slip if the tariffs are too high. Additionally, factory costs go up lowering the profits going to the rich guys (reducing the tax income from capitalists) and can send workers migrating to lower income jobs -- which lowers the number of craftsmen. It can also raise the price of the goods you need for your army and for keeping up your stock piles.

So:

1. Use tax levels for everyone to allow some to afford luxury goods -- unless you need to move pops to different jobs (i.e. You need farmers or laborers to move into craftsmen jobs...)
2. You make money with tariffs by finding the optimum where factories and pops can afford the goods, but you're still making money off the incomes. (Unemployed pops can't really pay taxes.)

Your economy is both a balancing act and a tool. Maximizing, then minimizing then maximizing again (100% - 0% - 100%) is the lazy way to manage tariffs, which I think of as supplemental income. If I need a quick boost in cash tariffs are the way to go. Taxes are more for the steady flow of cash into the treasury.

And just as a point... You have a lot more middle- and poor-class pops than you do rich guys. So to go against the common idea that you should tax rich guys less and poor pops more: One capitalist taxed to pay 100 into the treasury is worth less than 50 middle-class pops taxed to pay only 50 each. It isn't just a question of tax percentage, it's also about the number of pops being taxed. (Numbers used only for example.)

Edit: One last note...

When you're setting taxes go by the effective rate shown in the tool tip and not the straight percentage on the slider. If your administration is inefficient you can set the slider to 100% and still only be getting 20% from the pops.

 

[Kovax]

To expand on what Challenge said, check the individual occupations in your income menu. If, for example, Bureaucrats are getting luxury goods but clerics are struggling to meet basic needs, you either need to lower the Bureaucracy spending or raise the Education budget, and then possibly adjust the overall taxes for the income bracket to balance them both out compared to the other occupations.

You want them to get at least SOME luxury goods, but too much may cause excessive promotion out of needed occupations.

Typically, I keep tariffs at or near zero unless I need the income boost for a war or major expense early in the game. My tax rates start moderately high, while I pay to get a few industries started at government expense and research a few techs to make the factories profitable. Once I've got a stable set of essential intermediate goods going, I can lower taxes drastically and turn the economy over to the capitalist monkeys, and eventually they'll accidentally build a few profitable factories. Eventually, I end up with poor taxes close to zero, middle income taxes at zero, and rich at 10-20%, and everyone's fat, smart, and happy.

 

[TK-XD-M8]

wut I always have tariffs on max. In a US game I did a while ago, it was the main source of income for my empire.

 

[Kovax]

For me, there's rarely a need to keep significantly high tariffs beyond the first couple of years, unless you're running an unciv with minimal income potential or a small resource-poor minor. Normally, with most of the countries in the "Secondary" class or a bit lower, I can establish enough of an early industrial base to turn a profit after the first couple of economic and industrial techs plus the encouragement of enough bureaucrats to run the economy. Money soon becomes a relatively minor concern compared to pop promotions/demotions, imperial aspirations, and military needs.

If you tax everything coming into the country to where it's unaffordable to your pops, and don't produce everything yourself, they're not going to promote into Clerics, Bureaucrats, Officers, or Clerks. I can rob the rich until I set up a minimum set of factories, then rob the poor instead to allow the rich to build railroads and more factories, and finally ease the burdens on the poor when the factories start turning a healthy profit. Once I get Literacy up to a decent level and start researching techs to be economically competitive, money just doesn't matter anymore; manpower and resources are the bottlenecks.

 

[Shammah175]

I do something very similar to the guy in the video.

Early game, full taxes, full tarrifs. This allows me to fully fund military/naval/building SP, education, admin, and Military spending, all while accumulating gobs of cash for the future (for naval bases, forts, etc.)

Mid game, I lower taxes and tarrifs some, esp lower taxes on the low class and the rich. This allows capitalists to accumulate money to invest in my country, and encourages the promotion of craftsmen from farmers/laborers.

Late game, reduce taxes on middle class, and keep reducing tarrifs, since my economy is humming along quite nicely.

The early game tarrifs do not hurt your industry as much as others would lead you to believe, since your industry sucks early game anyways. It's better to be able to fully fund education, admin, and military spending while accumulating a nice stockpile of cash.